7 (Bad) Reasons People Don’t Buy Life Insurance

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Life insurance is something most of us agree we need but don’t actually buy, according to research.

First, the numbers. The insurance and financial services industry research group LIMRA reported in 2013 that 30% of U.S. households had no life insurance at all, and an additional 26% had only group insurance (typically offered through employers, and often less than people need).

Meanwhile, half of U.S. households said they needed more life insurance, but only 8% said they were very likely or extremely likely to buy it the next year.

Why is that?

Cost. In a 2014 survey by LIMRA and the nonprofit insurance group Life Happens, 63% of respondents said they didn’t buy coverage because they thought it was too expensive. That could mean they thought it wasn’t worth the cost or they couldn’t fit it in their budget. Representing the second camp, 69% said paying for basic living expenses such as housing, food and utilities kept them from buying life insurance, while the cost of extras like Internet, cable and cellphones was a barrier for 52%, according to the study.

Misconceptions. Asked how much they thought a $250,000 term life insurance policy for a healthy 30-year-old would cost, people under age 25 gave a median estimate of $1,000 a year, while older adults said $400, LIMRA and Life Happens reported. The real cost is about $150.

Other financial priorities. Other financial priorities kept 59% of respondents in the LIMRA/Life Happens survey from buying life insurance. In 2013, LIMRA reported that 67% of consumers listed saving for retirement as a top financial concern, while fewer than 40% cited other concerns that life insurance would address (such as premature death, funeral costs and leaving money for heirs).

Other demands on attention. Many of us start thinking about life insurance when we have children. But that’s also a time when we’re harried and sleep-deprived. Actually buying insurance can get shoved into our to-do list’s metaphorical diaper pails. LIMRA and Life Happens reported that 30% of people said they didn’t buy insurance because they hadn’t gotten around to it.

Complexity. Once we start looking into it, we’re confronted with term life insurance, permanent life insurance and their many variations. The LIMRA/Life Happens survey found 37% of respondents were unsure how much life insurance they needed or what type to buy. Given our limited attention span, it’s no wonder nearly 19 million consumers have gotten stuck in the shopping process, according to a recent LIMRA report.

Lack of trust. Some people don’t buy life insurance because they don’t trust insurance companies (38% of respondents) and insurance agents (37%), according to the survey.

Unpleasantness. Most of us don’t like thinking about death, and 30% of people gave that as a reason for not buying life insurance, LIMRA and Life Happens reported.

One good reason

That list leaves out one good reason some of us don’t buy life insurance: We don’t need it.

The Consumer Federation of America puts it simply, advising: “Those without dependents don’t need life insurance.”

The National Association of Insurance Commissioners offers similar advice: “While buying a policy early in your life will provide you with better deals and potentially guarantee your insurability, some experts doubt that individuals need life insurance at a young age when they typically don’t have dependents.”

At the other end of life, there are reasons you may no longer need insurance. If your kids are grown and the house is paid off, for example, you might not need life insurance.

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